Definition: A resistance level in trading is a price point at which an asset, such as a currency pair, stock, or commodity, experiences selling pressure and struggles to move above. It acts as a psychological barrier where the asset’s price tends to face downward pressure due to increased supply from sellers entering the market.
Understanding and analyzing resistance levels is crucial for effective trading. These levels help traders identify potential points where an asset’s price might reverse or pause in an upward trend. By recognizing resistance levels, traders can make informed decisions about entering or exiting trades, setting stop-loss and take-profit orders, and managing risk. Effective use of resistance levels allows traders to capitalize on price movements, improve their trading strategies, and optimize their overall trading performance.
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